consolidate my student loans with spouse

Should I Consolidate Medical School Loans With My Spouse?

Marriage is a union of individuals, households, and, well, sometimes debt. If you or your spouse/partner is a doctor, you know all too well that you’re probably looking at over $250,000 in medical school loans. Add any student loans that you’ve also accumulated and you may begin to wonder: should I consolidate medical school loans with my spouse?

Before you can make any decisions, you need to know what type of student loans you’re working with: federal or private. It’s also important to understand the difference between spousal loan consolidation and spousal loan refinancing. We can help you with this part. Let’s get started.

Spousal Student Loan Consolidation

Spousal student loan consolidation is when a married couple combines individual debts into one joint loan. The lender issues one large loan to pay off each spouse’s smaller loans. Both parties then become primary borrowers on the new balance. 

Married federal student loan borrowers could consolidate their balances into a federal joint loan until 2006. However, federal joint loan consolidation is no longer an option. Even now, only some private lenders offer married student loan consolidation. If you do find a private lender that offers joint consolidation, it works by lumping both partners’ loans into a larger loan with a single payment option. Both spouses become co-borrowers who have equal responsibility for the debt. 

A word of caution. If you’re thinking about consolidating federal loans into private loans, doing so removes benefits granted by the federal government, like:

  • Income-driven repayment options
  • Student loan forgiveness programs 
  • Federal deferment and forbearance options
  • Loan forgiveness upon death

Here are the pros and cons of private married loan consolidation: 

Pros

  • New interest rate. Depending on current interest rates and your income, education level, and credit history, you might save money with a lower interest rate. 
  • Use the couple’s best credit history. Often, only the better-looking (on paper only!) spouse’s credit and education matter to the lender. They will consider the better record when deciding on loan terms. This spells good news for partners who don’t currently work.
  • Single payment. Instead of tracking multiple loans and due dates, you’re left with one monthly payment to remember. 

 Cons

  • Joint Liability. Spouses with joint consolidated loans are co-borrowers, meaning they are both liable for the balance from the start and even after divorce. 
  • Fewer benefits. If you refinance federal loans into private you lose federal benefits like debt forgiveness or income-driven repayment plans (see above).

Again, not many private lenders offer true joint consolidation, but PenFed offers a Spouse Loan that can be used for consolidation. 

Spousal Student Loan Refinancing

An alternative to student loan consolidation is loan refinancing. During this process, you can apply for joint refinancing by taking out a new loan and adding a spouse as a co-signer. The new loan would pay off one or both of your previous loans. While the primary borrower is responsible for the loan, the co-signer agrees to pay off the debt if the primary borrower can’t. Because you’re “spreading the risk,” so to speak, you may enjoy a more favorable interest rate or loan terms.

The new rate on refinancing would be based on current market rates, which could change interest costs.

Here are the pros and cons of spousal student loan refinancing: 

Pros

  • More options. It’s easier to find a lender that offers joint refinancing over joint loans, allowing you to rate shop. 
  • Lower rates. Depending on your credit scores, you may qualify for a better interest rate.
  • Cosigner releases. Some lenders offer a cosigner release option. This contract provision releases the cosigner from responsibility after making a set number of consecutive, on-time payments. 

Cons

  • Qualification difficulties. Refinancing lenders may take into account both borrowers’ income, debts, and credit scores. That can make it harder to qualify if one partner has poor credit or no income. 
  • Lose federal loan benefits. Forfeit access to Public Service Loan Forgiveness which forgives federal loans if you are employed by a US government position or non-profit. You would also not have income-driven repayment benefits that could shrink loan payments during residency or if you choose a lower-paying career. 
  • Divorce isn’t an out. If your lender doesn’t offer cosigner releases, you may not be released from your loan obligations during a divorce. If one spouse doesn’t pay up, the other’s finances could suffer. 

Is consolidating or refinancing medical school loans with a spouse worth it?

After marriage, you might consider whether you should consolidate or refinance medical school loans with a spouse. Here are some final considerations to help determine if consolidating with your spouse is worth it: 

  • First, you’ll need to review your mix of federal and private loans and decide if you don’t mind losing federal loan benefits. If you refinance federal loans into private loans, then you won’t be eligible for income-based payment reductions or loan forgiveness offered on federal loans. 
  • However, you may want to consolidate medical school loans with a spouse if you would qualify for a lower interest rate, want to simplify repayment, and don’t mind being jointly liable for the debt. 
  • On the other hand, if you decide to work for the government or at a nonprofit, you may not want to consolidate medical school loans with a spouse in order to maintain access to loan forgiveness.

Who would’ve known that deciding whether to refinance is not just a financial decision, but also one based on your career choices? 

  • Elizabeth is a Physician family advocate, Certified Life Coach for Physician Wives, EM wife of 20+ years, mother, and founder of The MedCommons – a marriage between her tech/business dev background and passion for helping physician families.

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